How CEO emotional patterns relate to firm value
Article Sidebar
Main Article Content
Abstract
Objective: To investigate how emotional states expressed in CEOs’ communication relate to the financial performance of Brazilian companies.
State of the art: Research in behavioral finance indicates that executives’ emotional characteristics are related to strategic decisions, such as investment, innovation, and risk management. However, quantitative evidence linking emotions to financial performance remains limited, especially in emerging markets such as Brazil.
Scope: The study analyses 2,480 earnings calls from 79 companies listed on B3 between 2013 and 2023, using Natural Language Processing (NLP) techniques and both linear and non-linear statistical models.
Originality: The study measures patterns associated with stress, risk-taking, risk aversion, and resilience using linguistic proxies, examining their relationship with firm value (Enterprise Value/Total Assets).
Impacts: The results indicate that executive communication may provide relevant information about CEOs’ emotional traits for understanding firm performance and strategic decisions, offering a useful analytical approach for investors, boards, and companies.
SDGs: 8 – Decent Work and Economic Growth; 9 – Industry, Innovation and Infrastructure; 12 – Responsible Consumption and Production.
Downloads
Article Details
References
Hirshleifer, D. (2015). Behavioral finance. Annual Review of Financial Economics, 7, 133-159. https://doi.org/10.1146/annurev-financial-092214-043752
Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-291. https://doi.org/10.2307/1914185
Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of management Review, 9(2), 193-206. Https://Doi.Org/10.5465/Amr.1984.4277628
Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193-206. https://doi.org/10.5465/amr.1984.4277628
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1998). Law and finance. Journal of Political Economy, 106(6), 1113-1155. https://doi.org/10.1086/250042
Loughran, T., & McDonald, B. (2011). When is a liability not a liability? Textual analysis, dictionaries, and 10‐Ks. The Journal of Finance, 66(1), 35-65. https://doi.org/10.1111/j.1540-6261.2010.01625.x
Loughran, T., & McDonald, B. (2016). Textual analysis in accounting and finance: A survey. Journal of accounting research, 54(4), 1187-1230. https://doi.org/10.1111/1475-679X.12123
Loughran, T., & McDonald, B. (2024). Measuring firm complexity. Journal of Financial and Quantitative Analysis, 59(6), 2487-2514. https://doi.org/10.1017/S0022109023000716
Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-291. https://doi.org/10.2307/1914185
Ackert, L., & Deaves, R. (2010). Behavioral finance: Psychology, decision-making, and markets; Malmendier, U., & Tate, G. (2005). CEO overconfidence and corporate investment. The Journal of Finance, 60(6), 2661-2700. https://doi.org/10.1111/j.1540-6261.2005.00813.x ; McGuinness, P.B., Lam, K.C.K. & Vieito, J.P. Gender and other major board characteristics in China: Explaining corporate dividend policy and governance. Asia Pac J Manag, 32, 989–1038 (2015). https://doi.org/10.1007/s10490-015-9443-y
Sutcliffe, K. M. (2003). Organizing for resilience. Positive organizational scholarship: Foundations of a new discipline; Sutcliffe, K. M. (2003). Organizing for resilience. Positive organizational scholarship: Foundations of a new discipline.
Delgado-García, J.B., De La Fuente-Sabaté, J.M. & De Quevedo-Puente, E. (2010), Too Negative to Take Risks? The Effect of the CEO's Emotional Traits on Firm Risk. British Journal of Management, 21: 313-326. https://doi.org/10.1111/j.1467-8551.2008.00625.x
Porcelli, A. J., & Delgado, M. R. (2009). Acute Stress Modulates Risk Taking in Financial Decision Making. Psychological Science, 20(3), 278-283. https://doi.org/10.1111/j.1467-9280.2009.02288.x; Gibbons, C., Dempster, M., & Moutray, M. (2008). Stress and eustress in nursing students. Journal of Advanced Nursing, 61(3), 282-290. https://doi.org/10.1111/j.1365-2648.2007.04497.x
Mayew, W. J., & Venkatachalam, M. (2012). The power of voice: Managerial affective states and future firm performance. The Journal of Finance, 67(1), 1-43. https://doi.org/10.1111/j.1540-6261.2011.01705.x
Huang, X., Baker, J., & Reddy, R. (2014). A historical perspective of speech recognition. Communications of the ACM, 57(1), 94-103.
Spence, M. (1973). l the MIT press. The Quarterly Journal of Economics, 87(3), 355-374.
Chuthanondha, S. (2020). Do managements tell us the whole truth and nothing but the truth? Impact of textual sentiment in financial disclosure to future firm performance and market response in Thailand. International Journal of Monetary Economics and Finance, 13(3), 244-252. https://doi.org/10.1504/IJMEF.2020.108831
Kayed, S. and Alta’any, M. (2025), "Disclosure tone: information or obfuscation? Evidence from an emerging market", Accounting Research Journal, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/ARJ-06-2024-0230
Harrison, J. S., Thurgood, G. R., Boivie, S., & Pfarrer, M. D. (2019). Measuring CEO personality: Developing, validating, and testing a linguistic tool. Strategic Management Journal, 40(8), 1316-1330. https://doi.org/10.1002/smj.3023
Kelly, B., & Xiu, D. (2023). Financial machine learning. Foundations and Trends® in Finance, 13(3-4), 205-363. ttp://dx.doi.org/10.1561/0500000064
Zhang, T., Xu, B., Thung, F., Haryono, S. A., Lo, D., & Jiang, L. (2020, September). Sentiment analysis for software engineering: How far can pre-trained transformer models go?. In 2020 IEEE International Conference on Software Maintenance and Evolution (ICSME) (pp. 70-80). IEEE. 10.1109/ICSME46990.2020.00017
Loughran, T., & McDonald, B. (2011). When is a liability not a liability? Textual analysis, dictionaries, and 10‐Ks. Journal of Finance, 66(1), 35-65. https://doi.org/10.1111/j.1540-6261.2010.01625.x
Chuthanondha, S. (2020). Do managements tell us the whole truth and nothing but the truth? Impact of textual sentiment in financial disclosure to future firm performance and market response in Thailand. International Journal of Monetary Economics and Finance, 13(3), 244-252. https://doi.org/10.1504/IJMEF.2020.108831
Kayed, S. and Alta’any, M. (2025), "Disclosure tone: information or obfuscation? Evidence from an emerging market", Accounting Research Journal, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/ARJ-06-2024-0230
Lie, E., & Lie, H. J. (2002). Multiples Used to Estimate Corporate Value. Financial Analysts Journal, 58(2), 44–54. https://doi.org/10.2469/faj.v58.n2.2522
Thakur, O. A., Tunde, M. B., Noordin, B. A. A., Alam, M. K., & Prabowo, M. A. (2024). The relationship between goodwill and capital structure and the moderating effect of financial market development. Journal of Economics, Finance and Administrative Science, 29(57), 121-145. https://doi.org/10.1108/JEFAS-04-2022-0107
Pan, Y., Siegel, S., & Wang, T. Y. (2017). Corporate risk culture. Journal of Financial and Quantitative Analysis, 52(6), 2327-2367. https://doi.org/10.1017/S0022109017000771
Jiang, F., Lee, J., Martin, X., & Zhou, G. (2019). Manager sentiment and stock returns. Journal of Financial Economics, 132(1), 126–149. https://doi.org/10.1016/j.jfineco.2018.10.001
Tetlock, P. C., Saar-Tsechansky, M., & Macskassy, S. (2008). More than words: Quantifying language to measure firms' fundamentals. The Journal of Finance, 63(3), 1437-1467. https://doi.org/10.1111/j.1540-6261.2008.01362.x
Jiang, F., Lee, J., Martin, X., & Zhou, G. (2019). Manager sentiment and stock returns. Journal of Financial Economics, 132(1), 126–149. https://doi.org/10.1016/j.jfineco.2018.10.001
Loughran, T., & McDonald, B. (2011). When is a liability not a liability? Textual analysis, dictionaries, and 10‐Ks. Journal of Finance, 66(1), 35-65. https://doi.org/10.1111/j.1540-6261.2010.01625.x
Rosenbaum, P. R., & Rubin, D. B. (1983). The central role of the propensity score in observational studies for causal effects. Biometrika, 70(1), 41-55. https://doi.org/10.1093/biomet/70.1.41
Hainmueller, J. (2012). Entropy balancing for causal effects. Political Analysis, 20(1), 25–46. https://doi.org/10.1093/pan/mpr025
Wood, S.N. (2017). Generalized Additive Models: An Introduction with R, Second Edition (2nd ed.). Chapman and Hall/CRC. https://doi.org/10.1201/9781315370279
Mayew, W. J., & Venkatachalam, M. (2012). The power of voice: Managerial affective states and future firm performance. The Journal of Finance, 67(1), 1-43. https://doi.org/10.1111/j.1540-6261.2011.01705.x
Melloni, G., Caglio, A., & Perego, P. (2017). Saying more with less? Disclosure in conflicting institutional logics: Evidence from integrated reporting. Journal of Accounting and Public Policy, 36(3), 220–238. https://doi.org/10.1016/j.jaccpubpol.2017.03.001
Kaiser, R. B., LeBreton, J. M., & Hogan, J. (2015). The dark side of personality and extreme leader behavior. Applied Psychology, 64(1), 55-92.
https://doi.org/10.1111/apps.12024
Wallace, K., Bollfrass, A., Cooper, O., Epstein, D., Forrest, S., Lukosch, H., ... & Noetel, M. (2025). Expert-derived recommendations for designing and facilitating tabletop crisis exercises: A Delphi study. Safety Science, 189, 106898. https://doi.org/10.1016/j.ssci.2025.106898
Allen, J. A., Reiter-Palmon, R., Crowe, J., & Scott, C. (2018). Debriefs: Teams learning from doing in context. American Psychologist, 73(4), 504. https://doi.org/10.1037/amp0000246
Malmendier, U., & Tate, G. (2005). CEO overconfidence and corporate investment. The journal of finance, 60(6), 2661-2700 https://doi.org/10.1111/j.1540-6261.2005.00813.x
Highhouse, S., Wang, Y., & Zhang, D. C. (2022). Is risk propensity unique from the big five factors of personality? A meta-analytic investigation. Journal of Research in Personality, 98, 104206. https://doi.org/10.1016/j.jrp.2022.104206
Baker, M., & Wurgler, J. (2007). Investor sentiment in the stock market. Journal of economic perspectives, 21(2), 129-151. https://doi.org./10.1257/jep.21.2.129
Rappaport, A. (1986). Creating shareholder value: The new standard for business performance. Free Press.
Jankalová, M., & Kurotová, J. (2020). Sustainability assessment using economic value added. Sustainability, 12(1), 318. https://doi.org/10.3390/su12010318
Yerkes, R. M., & Dodson, J. D. (1908). The relation of strength of stimulus to rapidity of habit-formation. Journal of Comparative Neurology and Psychology, 18(5), 459–482. https://doi.org/10.1002/cne.920180503
Schaufeli, W. B., & Taris, T. W. (2021). A critical review of the Job Demands–Resources Model: Implications for improving work and health. Current Psychology, 40(5), 3125–3136. https://doi.org/10.1007/978-94-007-5640-3_4